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Supply Chain News: Amazon Keeps Buying Cargo Jets, but Some Insiders Think Air is a Defect

 

Purchase of 11 More Planes brings Total to 85, and more than 150 Flights per Day

Jan. 19, 2020
 

As we reported two weeks ago, Amazon is buying 11 Boeing 767-300 aircraft from Delta and WestJet, as it moves to continue expansion of its cargo fleet in 2021 and 2022.

"In case there was any doubt, Amazon just signaled just how serious it is about building its own transportation and delivery network," said an article on GeekWire.com. Why? Because this marks the first time Amazon has bought, rather than leased, planes for its cargo fleet.

Supply Chain Digest Says...

 

The same day it announced the order for the 11 cargo planes Amazon flew 153 flights across some 40 global airports


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The additional eleven aircraft put the company on track to have more than 85 cargo planes in its network by the end of 2022. The deals are the latest move by Amazon to build up its logistics capabilities, making its operations more self-reliant.

A September report by DePaul University's Chaddick Policy Brief found that the number of daily Amazon Air flights grew 27%, from 85 to 108 between April 23 and Aug. 20. The report described that as "extraordinary growth considering that it comes on the heels of much previous expansion, and that global air cargo was down more than 20% in June and July."

That's one view. But apparently, not everyone inside Amazon views the rapid growth in air capability favorably.

According to the TransportTopics.com web site, "Inside the company, Amazon Air is sometimes considered more of an expensive necessity than an asset. An organization bent on delivering orders quickly and efficiently would rather move products by truck than plane, which costs as much as seven times more."

TransportTopics adds that "Employees have internalized this fact with a typically Amazonian mantra: "'Air is a defect.'" - the notion seeming to be that its network of fulfillment centers or perhaps inventory positioning strategies were not sufficient in eliminating the need for air shipments.

Another issue: most of the planes in Amazon's cargo fleet are older models that get less miles per jet fuel gallon versus newer more fuel-efficient planes, increasing costs and undermining recent commitments from Amazon to reduce its CO2 emissions.

The Amazon cargo planes keep flying for several reasons, including costs, control and maybe most important of all customer service.

It seems Amazon simply can't meet its one- and two-day shipping service for Prime members without a large air cargo, especially with the huge surge in on-line buying (up 36.7% in Q3) straining the resources of Amazon partners UPS and the United States Postal Service (USPS) – forcing Amazon to build its own capacity of trucks and planes in response. Fancy sourcing algorithms are well and good – but in the end physical assets are what really count.


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CATEGORY SPONSOR: SOFTEON

 

 

Some of that strategy dates back to 2013, when a combination of overwhelmed parcel carriers and bad weather in Dallas and elsewhere caused shipment delays that resulted in orders not making it to homes by Christmas, with Amazon issuing refunds to affected customers at a huge costs.

Amazon started building its own network not long afterwards.

The same day it announced the order for the 11 cargo planes Amazon flew 153 flights across some 40 global airports, according to data from Plane Finder, which tracks airplane movements.

Once again for peak season 2020 shipments, UPS – which says about 20% of its US revenue is from Amazon - raised surcharges on parcel deliveries based on a variety of factors such as rural deliveries, oversized packages and more.

Though UPS of course has a contractual relationship with Amazon that would address new surcharges, it may not be a coincidence the acquisition of the new cargo jets was consummated so soon after peak season ended.

Is Amazon Air a good thing for the company? Let us know your thoughts at the Feedback section below.


 
 
 
 
   

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